Low-Value Consignment Relief to be abolished by April 1st

Due to exploitation by some companies, the Channel Islands are now seeing the abolishment of the Low-Value Consignment Relief by April 1st.

Low-Value Consignment Relief, or LVCR, is an administrative relief governed by the EU Council Directive 2009/132/EC that excludes the VAT from shipments of a low value. This optional VAT relief was designed to speed up the transit of low value goods through the mail which might otherwise be delayed by customs and also reduce the cost of tax collection where it might not be practicable. The states could decide whether or not to allow the relief which could be set between €10 and €22.

Such a relief obviously become a way of exploiting the system to reduce cost and become more competitive. Complaining later came from other companies as well as a Treasury minister who said such exploit was not proper. With the abolishment of this relief, companies such as Play and Amazon will no longer be VAT exempt.

For example, in 2006, Jersey claimed to have weeded out UK firms using the Channel Islands as part of what it called a “scam” to avoid tax. Tesco and Amazon were among those who left the island at that time, though both have come back with the help of agent firms on the islands, such as Indigo Starfish and The Hut Group.

Such an abolishment has its own share of negative effects as one Channel Islander who works in the industry told The Guardian: “I guess I just feel deflated by the whole sad VAT story. I’m going to lose my job. But I do understand its been our unfair advantage. At this point in time, [the island] has nothing else.”

David Greene, a partner at Edwin Coe, representing campaign group Retailers Against VAT Avoidance Schemes (RAVAS), said: “RAVAS and its members have been campaigning for the past 10 years to abolish the loophole that allows retailers based in Jersey and Guernsey to avoid VAT on low value goods ordered over the internet by UK consumers. As a result of RAVAS’s pleas to the European commission, the UK government clamped down on this abuse. UK retailers have been seeking an even playing field but have been competing with supplies from the Channel Islands with one hand tied behind their back.”

Source: The Guardian